LABOR >Peugeot slashes jobs, sparks union reaction

A worker walks past a site map at a PSA Peugeot Citroen factory near Rennes.

Struggling French carmaker PSA Peugeot Citroen said yesterday it would slash 8,000 jobs in a shock announcement blamed on a failing European market that sparked a fierce union response.

Unions slammed the announcement as a “declaration of war” and an “earthquake,” with the hardline stance certain to add to the problems facing the new Socialist government as it deals with France’s flagging economy.

President François Hollande was elected in May on a promise to put the economy back on track, focusing on growth rather than the austerity policies adopted across Europe in the face of the eurozone debt crisis.

Prime Minister Jean-Marc Ayrault said the layoffs were “a real shock” and announced that the government would present its rescue plan for the struggling auto industry on July 25.Shares in Peugeot rose on news of the lay-offs.

The auto industry is strongly unionized and a major employer in French manufacturing, with job losses there having a knock-on effect on the wider economy.

PSA, France’s biggest carmaker and second in Europe to Germany’s Volkswagen, said it expected the European market to shrink eight percent this year and had to adjust its business in the face of the worsening outlook.

For the period 2007-12, the market is down 23 percent, it said, compounding problems which left its plants operating at just 76 percent of capacity in the first half of this year.

PSA said the problem was even worse in the small car segment, which accounts for 42 percent of its sales “and where most of the competing models are made in low-cost countries”.

As a result, the auto division is expected to report an operating loss of some 700 million euros ($860 million) for the first of half of 2012, producing overall a net loss for the period. PSA said in a statement that it would cease production at its historic Aulnay site near Paris which employs 3,000 people, with 1,400 jobs going at its Rennes plant.

In addition, some 3,600 jobs will be cut across the corporate structure, as the company continues “reducing costs and improving its operating efficiency.” Following the announcement made to unions at an extraordinary meeting, Peugeot boss Philippe Varin vowed that “nobody would be left by the wayside”. “I am fully aware of the seriousness of today’s announcements, as well as of the shock and emotions they will arouse,” Varin said in a statement announcing the job cuts.